The monthly account for the month of May, available in the website of the Controller General of Accounts presents a very dismal picture. While the Government is braving with lot of positive statements the situation seems grim. If we look at the total revenue receipts during the first two months of this fiscal, only two percent of the actual budget estimates have been realised. The revenue expenditures have shot to more than seventeen percent of what was anticipated in the budget for the entire year. This is leading to a revenue deficit of just over four lakh crores and a fiscal deficit of over four and half lakh crores.
The government’s profligate borrowing in the past is seen from the fact that the total revenue receipts in the last two months were only a modest Rs 45498 crores whereas the interest payments during this period was a whopping Rs 78265 crores.
How is the Government Meeting the Deficit?
External Financing was pegged at less than Rs 5000 crores for the entire fiscal but in the first two months itself the Government has received nearly Rs 30,000 crores. These are mostly from the Multilateral Development Banks who have lent on the Covid-19 recovery efforts. In percentage terms it is 630 percent of what was anticipated of the entire year! All the four major multilateral development Banks – World Bank, Asian Development Bank, New Development Bank and Asian Infrastructure and Investment Bank have already lent and have pledged more funds for the country. The Government has been clever to negotiate deals that allows to account for costs since the 1st of January 2020. One wonders why such concessions on expenditure allocations are granted since this will obviate a number of due diligence processes required for disbursement. There were rumours and speculations doing rounds that the outgoing President of NDB, K.V Kamath would join as the Finance Minster in the Union Cabinet. Even if this was being considered, perhaps it was prudent that the person who was responsible to enable secure a significant and flexible loan has not been appointed immediately, lest it be seen as a quid pro quid and a conflict of interest.
The other worrying issue is the scale of market borrowings. The Government had anticipated the need for market borrowing to the tune of nearly Rs Five lakh crores for the entire year but in the first two months itself it has borrowed over Rs Two and half Lakh crores, almost half of the borrowing anticipated for the entire fiscal. This would lead to the vicious cycle of paying more interests and thus less available for public expenditure.
Has this Meant More Money for People?
The increase in the borrowing from external and market sources to run the government would be anticipated in the unprecedented conditions in which the poor are going through due to this pandemic. One would also naturally expect that greater part of this is spent on food and health subsidies to the poor and the particularly a huge number of people who lost jobs due to the lockdown. However, the what the accounts show is saddening. The food subsidies during the past two months have been around thirty-five thousand crores while in the corresponding period of April and May 2019, nearly Rs Eighty thousand crores were spent for food subsidies. The government has actually cut the food subsidies by more than half! Similarly, the fuel subsidies which were Rs 14222 crores have been cut to Rs 8341.14 crores. We know how we are being fleeced for fuel despite the supressed prices in the global markets and little is even discussed about the inflation consequences of the enhanced diesel prices. Only the subsidies on urea and other fertilisers, which go directly to the producers, have been maintained at the same level as the previous year.
Difficult Times Ahead!
The money that is coming from international agencies now acquire such complexity that it is impossible for the common man to understand the huge figures that are spoken about. A forthcoming paper of the policies of the Asian Development Bank demonstrates how complex the nature of this money is likely to be. That is why when people hear about Rs 20 lakh crores and see that they are not even paid sustenance wages by the Government.
The budget process seems to have lost significance in the governance systems and Covid-19 offers a good cover. The government continues to asymmetrically favour the corporates and fleece the public. In one case, the Government seems helpless and on the other the public. This pandemic definitely calls for a complete relook at our economic growth model.
If we continue to pander to the corporates, which are growingly becoming more demanding of concessions and depending upon the State and neglect the people, we will soon have riots in the streets or will soon be turned into a banana republic selling away the limited resources that are left and leave future generations to penury.